SEBI is probing Adani Group's offshore deals: Know why
Things are not getting any easier for Adani Group. The embattled conglomerate has been on an uphill task since the damning report by Hindenburg Research. Now, according to Reuters, the Securities and Exchange Board of India (SEBI) is investigating some of the group's offshore transactions. A SEBI probe is no child's play. Let's take a look at what led to this.
Why does this story matter?
Adani Group has been showing signs of recovery after the disastrous start to 2023. The conglomerate, at one point, lost over $150 billion in market capitalization. However, the group's listed companies have been putting together impressive numbers recently. The SEBI probe, especially into a matter the Hindenburg report pointed out, is expected to put a dent in Adani Group's recovery road.
Hindenburg report accused Vinod Adani of creating offshore entities
In its report, Hindenburg accused the conglomerate of stock parking, market manipulation, and money laundering with the help of offshore shell entities. Gautam Adani's elusive elder brother Vinod Adani was central to this allegation. The report accused Vinod of creating offshore entities with "little to no genuine corporate presence" to make the group's listed companies seem financially healthy.
SEBI is probing a possible 'related party transaction' rules violation
SEBI is investigating a possible violation of 'related party transaction' rules by the Adani Group in its dealing with at least three offshore companies with links to Vinod. The three entities allegedly entered into multiple investment transactions with unlisted units of the conglomerate. SEBI is probing whether Adani Group violated related party transaction rules by not disclosing Vinod's links to those entities.
What are related party transactions?
Under the Companies Act, 2013, a related party can be direct relatives, promoter groups, a holding, subsidiary, or associated company of listed companies, etc. Transactions between related parties need the approval of shareholders, the board of directors, and the audit committee. Such transactions have to be disclosed in the board's report to shareholders, to stock exchanges, and in the annual report.
Adani Group stock suffered a setback in the market
Following the report of SEBI's probe into Adani Group's offshore deals, the conglomerate's listed companies suffered a beating in the market. Adani Enterprises, the group's flagship company, is down 1.51% at the time of writing. Adani Ports is down by 1.08%, while Adani Total Gas' shares declined by 2.39%. Adani Wilmar, Adani Transmission, and Adani Green are also trading in the red.
